Foreign grain-based foods performance exceptionally strong in 2009, January 12, 2010
by Eric Schroeder

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Share price performance for grain-based foods companies outside of North America could not have been any different in 2009 from that of 2008. Whereas economic uncertainty weighed on financials worldwide in 2008 leading to numerous declines in performance, a resounding rebound took place this past year. Of the 40 companies tracked by Milling & Baking News, only 7 recorded year-over-year losses in share price.

On the London Stock Exchange, Associated British Foods finished the year at 822p, up 13% from 730p in 2008. During the year, the company completed its acquisition of Azucarera Ebro S.L.U., the Spanish sugar business of Madrid-based Ebro Puleva. The move is expected to strengthen the existing E.U. operations of A.B.F.’s British Sugar business. In addition, A.B.F.’s ABF Ingredients division in March announced the merger of two U.S. business units, Protient, Inc. and PGP International, which will operate under the PGP International name.

Northern Foods P.L.C., a miller and a major manufacturer of private label foods, finished 2009 at 66.8p, up 18% from 56.75p a year earlier. Stefan Barden, chief executive officer of Northern Foods, said the company has overcome tough market conditions by investing in brands and businesses. The company’s bakery division success has been driven in large part to brand investment in Fox’s as well as a new marketing campaign for the Matthew Walker brand launched ahead of the Christmas trading period.

Carr’s Milling Industries P.L.C. closed at 422.5p, up narrowly from 417.5p in 2008. In the year, all three of Carr’s flour mills — at Kirkcaldy (Fife), Silloth (Cumbria) and Maldon (Essex) — made volume gains through product innovation and increased their profit through cost reduction.

Tate & Lyle P.L.C., the global sweetener company, had a 52-week low of 225.75p, but ultimately ended the year up 8%, closing at 432.7p. The company has benefited from sales of Splenda sucralose, which reached £101 million in the six months ended Sept. 29, 29% ahead of last year. Tate & Lyle indicated that global new product launches containing high-intensity sweeteners decreased 5% in the 2009 financial year although launches containing Splenda sucralose increased by 7%.

Premier Foods, the U.K.’s largest food producer, finished 2009 at 35.7p, up 37% from 26.14p in 2008. The company said it continued to benefit from the successful relaunch of its Hovis brand, which now stands as the No. 2 wrapped bread in the U.K. market with market share over 25%.

Greggs P.L.C., an operator of retail bakery shops and cafes in the United Kingdom, finished 2009 at 435p, up 29% from 336p in 2008. In mid-August, Ken McMeikan, chief executive officer of Greggs, said the rebranding of Bakers Oven shops to Greggs is proceeding on plan, with 40% of the 164 Bakers Oven shops now converted and the program continuing at a rate of two shops each week.

Two of the three leading U.K. retail chains posted share price gains in the

past year. Marks & Spencer, the

retail giant that has an important stake in food, finished the year at 402p, up 87% from 214.75p at the end of 2008. Tesco, the leader in U.K. food retailing, closed at 428p, up 19% from a year earlier. Sainsbury, P.L.C., meanwhile, finished the year at 323.5p, down 2%, from the 2008 close of 328.5.

In Ireland, Greencore Group P.L.C., a European maker of convenience food and malt products, finished at €1.39, up 48% from the 2008 close of €0.94. The company’s Convenience Foods division delivered a strong performance in the year, particularly in the second half.

Kerry Group finished the year at €20.58, up 57% from the 2008 close. The incorporation of flavors with its total ingredients offering through a go-to-market strategy helped deliver “encouraging results and a strong customer response” in the company’s American ingredients business. Also during the year, Kerry opened a new 250,000-square-foot Kerry Center in Beloit, Wis. The $50 million innovation and commercial center is expected to help the company spearhead future customer product commercialization.

In Australia, GrainCorp Ltd. closed the year at A$6.20, up A$1.30, or 27%, from the 2008 close, while Goodman Fielder Ltd. finished 2009 at A$1.63, up 23% from 2008. Goodman last month agreed to sell its commercial edible fats and oils business to Cargill for A$240 million ($220 million).

AWB Ltd., meanwhile, closed the year at A$1.13, down 47% from the 2008 finish of A$2.15.

In France, Groupe Danone S.A., the country’s largest food and beverage company, closed 2009 at €42.83, up 5% for the year. The company early in 2009 agreed to sell its 25.48% stake in Britannia Industries Ltd. to Leila Lands Ltd. (Mauritius), a subsidiary of the Wadia Group. Based in Kolkata, India, Britannia Industries is known for its Britannia and Tiger brands of biscuits, which are highly recognized throughout India. Britannia is India’s largest biscuit company, with an estimated 38% market share.

In The Netherlands, Unilever, the Anglo-Dutch food and personal products business, closed 2009 at €22.78, up 29% from €17.68 per share in 2008. The company took two steps during 2009 showing its increasing focus on health and wellness: a pledge to reduce the salt content of products by the end of 2010 to help people reach the daily recommended dietary intake of 6 grams of salt per person, and the elimination of partially hydrogenated oils in its entire soft (tub) spreads portfolio in the United States by the second quarter of 2010.

Ahold, the Dutch-based company with global food retailing and food service operations, finished the year at €9.26, up 5% from €8.79. During much of 2009, the company said it delivered volume growth in all markets. Increased promotional activity continued, especially in the United States.

DSM, the Dutch chemical company with food ingredient interests, rose 89% for the year, closing at €34.61. The company said its nutrition unit has sustained its solid performance.

Like DSM, CSM, the Dutch company with a strong presence in baking ingredients in North America and in Europe, also finished sharply higher, ending up 60% at €18.38. EBITA of the Bakery Supplies North America division of CSM n.v. in the third quarter of fiscal 2009 was $38.3 million, up 71% from $22.4 million in the third quarter last year. The company said the improvement reflected slightly lower volumes more than compensated by a recovery of margins, cost savings as well as the continued improved performance of H.C. Brill.

In Switzerland, Nestle S.A., the world’s largest food company, closed at 50.20 Swiss francs, up 21% for the year. The company made news early in the year when its Nestle USA’s baking division recalled all varieties of the company’s Toll House brand of refrigerated cookie dough products because of a possible link between the refrigerated cookie dough products and reports of foodborne illness from the pathogen E. coli O157:H7. Nestle was in the news later in the year for a more positive reason, as its Cereal Partners Worldwide joint venture with General Mills, Inc. unveiled plans to create a new Innovation Centre in Orbe, Switzerland.

Aryzta AG closed 2009 at 38.55 Swiss francs, up 13% from 2008. Created in August 2008 from the merger of IAWS Group P.L.C. and Hiestand AG, Aryzta is a specialty baking company whose largest division is in Europe, accounting for more than 80% of sales. The Food North America segment of Aryzta AG enjoyed double-digit sales and profit growth in the year ended July 31, with Otis Spunkmeyer the principal growth driver and La Brea Bakery proving resilient.

Danisco A/S in Denmark soared 62%, closing at DK348.5 after finishing at DK214.5 in 2008. The company in late October broke ground on a cultures plant expansion in Madison, Wis. The new facility is expected to be operational in August 2010.

Share price movement in Japan was mixed. Nisshin Seifun, the Japanese holding company that includes Nisshin Milling, Japan’s largest flour miller, closed at Y1256, up 7% from a year earlier, but Nippon Flour Milling fell 6% for the year, closing at Y462, and Nissin Food Products, a leading manufacturer of instant noodles, fell 3%, closing at Y3030.

Baking leaders Yamazaki Baking and First Baking also were a mixed bag in 2009. Yamazaki closed at Y1101, down 20% from Y1379 in 2008; First Baking, meanwhile, finished at Y121, up 33% from Y91 in 2008.

Indonesia’s Indofood, one of the largest food producers in Asia, rebounded from a loss of 64% in 2008 by soaring 282% in 2009, closing the year at R3550.

In South Africa, Tiger Brands Ltd. ended two consecutive years of declines, finishing up 19% at R17000. The gain followed a 15% decline in 2008 and 2% decline in 2007.

Egyptian companies engaged in flour milling mostly were all higher with the exception of Egyptian Starch, which fell 31%, and Upper Egypt Flour, which fell 8%. Alexandria Flour rose 120% in 2009 after declining 24% in 2008 and 3% in 2007. Middle and West Delta Flour Co., which fell 13% in 2008, rebounded, rising 34%. South Cairo & Giza Flour Mills, which rose 42% in 2008, again finished higher, climbing 7% in 2009. North Cairo Flour, which fell 14% in 2008 and 10% in 2007, rose 12%.

In Africa, Flour Mills Nigeria P.L.C. climbed 13%. The gain followed a decline of 58% in 2008. Flour Mills Nigeria is primarily involved in flour milling, pasta production and cements production.

In Spain, Ebro Puleva S.A., shares rose 52% to €14.53, just off the 52-week high of €14.75 but well above the low of €8.04. Ebro disposed of its sugar business in April 2009, a move the company said marks “a leap forward” in its strategic plan, which currently is focused on growing rice, pasta, dairy and functional foods, while shedding non-strategic businesses and reducing debt.

In Chile, Quinenco closed the year up 22%. Molinos Rio Plata in Argentina closed at $11.90, up 17% from its 2008 finish.

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